Rate study shows Llano utility under strain; staff lays out scenarios that would raise residential bills

City staff told a public meeting July 1 that current utility rates do not fully cover the city’s cost of providing water service and that the city is not meeting its Texas Water Development Board (TWDB) debt‑service coverage covenant. The presentation included five rate scenarios and showed that some scenarios would increase typical household bills substantially in year one.

Why it matters: Staff reported a debt‑service coverage ratio of about 0.62, below the TWDB covenant requirement of 1.1. Staff said failing to meet the covenant can hurt the city’s credit rating and increase borrowing costs, reducing the city’s ability to finance capital projects such as dam improvements and lead/copper service line replacement.

Key figures and scenarios: Staff described a recent Willdan rate study and multiple scenarios. Staff said the city’s existing debt service of about $881,394 must be covered and that capital projects in the current CIP would add about $8 million in new debt according to a March CIP update. The study presented five scenarios; Scenario 1 (a conservation rate structure) shifts more cost to…